This is an interesting and challenging time for the Music label industry. They now have to take a decision that might either increase their profits or slow down their growth! The music industry was facing a tough time over the last decade or so due to a consistent decline in sales. However, the industry has bounced back in the last couple of years, mostly due to the increased popularity of paid music streaming services like Spotify and iTunes.

As some of you might know, the record labels have been at loggerheads with YouTube and are trying to get the copyright laws changed. They want YouTube to take more responsibility and not hide behind the Digital Millennium Copyright Act that shields it from taking responsibility for pirated content. Apart from the music labels, quite a few popular artists like Taylor Swift and U2 also lent their voice to this discontent and urged YouTube to compensate the artists better. But many industry observers criticized them for this sentiment, since a vast part of success of these artists have been primarily because of the visibility that they got through YouTube.

Enter Facebook

Facebook has been targeting the online video throne from quite some time now. Ever since its founder Mark Zuckerberg  made it clear that video is what Facebook is focusing on, we’ve seen a steady alteration of its news-feed algorithm with more focus on video content. Even though Facebook considers Twitter, Snapchat et al as its competitors; it is quite clear that it considers YouTube as its biggest rival. And Music streaming is one of the biggest revenue generators for YouTube. Music videos hosted on the platform rake in millions of views everyday! That’s exactly why, Facebook wants to cash in on this feud between the Music label industry and YouTube.music on facebook

Just before Grammy Awards thus year, upcoming musicians and artists from Universal Music performed in-front of talent scouts and executives from Spotify, YouTube etc. Interestingly enough, executives from Facebook were also present there – a clear sign of the company’s intentions. With nearly 2 Billion users signed up on the platform and a rapidly growing advertising business, Facebook will definitely change the game for the music industry.

What’s the music industry saying

During the heated debate of music labels v/s YouTube last year, it was revealed that YouTube paid the music industry a staggering $1 billion in ad revenue! However, music industry executives opined that YouTube intentionally had a relaxed approach towards copyright infringement. They wanted YouTube to cough up more. Now, if the labels manage to crack a deal with Facebook, it can use it to exert more pressure on YouTube and bring them back to the negotiation table.

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But the industry has to delicately handle the situation because:

  • The number of user generated video content in Facebook is massive! So coming up with a strategy to prevent copyright violations here can be extremely complex and time consuming.
  • The agreement can act like a blueprint that the industry can use to ink deals with other social platforms like Snapchat and Twitter. So the labels need to be very clear, clever and precise with this agreement.
  • The music industry has just come out of a long slump in revenue and sales. This agreement can make it all the more easy for people to get their hands on music for free disrupting the slowly growing sales and revenue.

However, industry observers are encouraged ever since Facebook hired Tamara Hrivnak in January. Tamara has a great reputation in the record industry and has also spent time at YouTube.

Bottom line

This is an interesting situation. YouTube has been consistently facing stiff competition from other platforms spearheaded by Facebook. If the music industry manages to crack a lucrative arrangement with Facebook, it will definitely try to curb YouTube’s dominance in the music streaming space. However, it should carefully device strategies to not antagonize the hard fought and earned growth that it has seen over the past few years. It should also ink the deal only when Facebook comes up with a system to police copyright infringement – like the Content ID mechanism of YouTube. Who will end up on the winning side? Or can they all sit and figure out deals that is a win-win for everyone? It’ll be interesting to wait and watch.

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